3 Goliaths take lumps in market but may rise again.

Three of the biggest companies in the mortgage industry have taken some lumps in the stock market in recent days. And judging from the reasons given by analysts, the abrupt first-quarter run-up in interest rates is still taking its toll.

Farther down the road, though, all three companies are expected to rebound.

At Countrywide Credit Industries, the nation's largest home lender, the problem was a sharp drop in earnings because of new conditions in the marketplace. The stock reached a low last week of $13.625 before recovering to about $14.25. It had been as high as $14.75.

And at Fannie Mae and Freddie Mac, the giant housing finance agencies, investors appeared to be responding to fears that disarray in the market for mortgage-backed securities may stunt long-term growth.

Freddie fell $3.50, and Fannie dropped $6.75 during the week.

Tom O'Donnell, who follows Countrywide for Smith Barney Shearson, said he found Countrywide's second-quarter earnings report disappointing. "I see their operating earnings as a negative 11 cents a share," he said. "And they sold some pretty attractive servicing, to show a gain."

The report by Countrywide said it made a profit of $57 million by selling about $5.9 billion of top-quality servicing to Fleet Mortgage Group. By contrast, reported earnings were just $ 19.1 million.

Major drains were a $16.5 million loss on loan sales, a loss of $19.3 million from a servicing hedge, and a cost of $25.6 million to discontinue the hedge in favor of a new one.

The strong point was servicing income of $103.2 million, a 37% gain from the quarter a year earlier, a positive trend that should continue.

Mr. O'Donnell downgraded Countrywide by one notch, from average performer to underperformer. "It's better to be prudent and stay out of the stock right now," he said. But for the longer haul, "Countrywide will reemerge as a powerful force in the mortgage business."

But Mr. Gray is taking the longer view that severe pricing competition will run its course in the next six to 12 months and Countrywide's earnings will again show strength. He upgraded the stock last week to "outperform," from "underperform."

Mr. O'Donnell said the shares of Fannie and Freddie were near their all-time highs so that they were vulnerable to worries about their long-term growth.

"People have been looking at the disarray in the market for mortgage-backed securities" and wondering what it means for the giant agencies, he said. "The MBS market is very cyclical; it gets nice, then it gets dicey, then it goes to plain vanilla. And every time it gets dicey, people start talking that the MBS market is washed up."

As a result, Mr. O'Donnell said, Fannie and Freddie both look attractive at present prices.

Mr. Gray of Bernstein said narrow spreads on mortgage-backed securities relative to equivalent Treasuries have constricted growth in MBS sales. He now foresees a growth rate for Fannie Mae of 12% to 13% a year instead of the 15% expected earlier.

But that growth rate would be much higher than the 7% to 9% expected for the S&P 500, he added. As a result, he finds the stock attractive and continues to rate it as an outperformer.